Merchant accounts are contracts between an acquiring bank that extends lines of credit to a merchant, and that allow businesses to accept payment for goods or services via credit cards.

Did you know that customers are more likely to purchase from businesses that offer credit card facilities? Statistics show that businesses using merchant accounts can see an immediate increase in the number of sales. These statistics are based on the average cash sale being only $9, while the average credit card sale is approximately $40.

No matter the type of business, the availability of merchant accounts will improve your cash flow in a number of ways. Here are some benefits for using merchant accounts:

- Having credit card facilities means you can offer customers the option to purchase on the spot.

- Processing fees for merchant accounts can be lower than check transaction fees.

- Debt Collection issues become the banks problem, not yours.

While there are obvious benefits to having merchant account facilities in your business, there are also some drawbacks to consider.

- You will have to institute measures to protect your business from credit card fraud.

- Your policies about charge-backs and refunds may need revising in order to minimize damages.

- If your business accepts credit cards on your website, be sure to use fraud protection measures to lower the risk of fraud, theft and scams.

Instituting Merchant Accounts

Setting up a merchant account can be relatively simple. You will need to set up a bank account for your company for the proceeds of any credit card purchases to be credited to. You will also need to lease processing equipment and software that will facilitate transactions.

If you intend to process credit card payments online through your companys website, then youll need to take the extra step of registering with a payment gateway like VirtualNet or CyberCash. Always check that the merchant account software you have will be compatible with your online payment gateway.

Comparing Merchant Accounts

Before you call your bank to get a merchant account, take the time to compare the options and offerings of several different banking institutions, in addition to merchant account providers. Fees and charges often vary greatly, so its very important to check what you’ll be charged and what fees are likely for each transaction.

For instance, fees might include initial start-up costs, equipment monthly lease fees, sales volume costs, transaction and processing fees. When looking at potential merchant account providers, be sure to ask for a written list of all the fees you’re likely to incur so that you can accurately compare them with other vendors.

Merchant Account Fees and Charges

Most providers will charge some form of application fee. This can vary from $0 up to $100 and sometimes more depending on your lender.

You may need to pay for your software, which can have an initial cost around $100 or more. Once installed, you may have to pay a monthly licensing lease, which can vary from $20-$50 a month. This, too, will vary and depend on your lender.

On top of these, you will incur transaction fees that range between $0.20-$0.50 per transaction. While these don’t sound high, if you process a lot of transactions they can really add up.

Other fees to ask about with any potential merchant account provider are charge back fees, minimum usage fees, statement fees, annual fees, close-out fees and account keeping fees.

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